BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 158 of 2011

Date of Decision : 02.02.2012

M/s. Gordon Herbert (India) Limited
Village Gujartola, Amethi Road,
Gauriganj, Raibareilly,
Sultanpur – 228001 (U.P.)

…Appellant

Versus

Shri Parag Basu,
Adjudicating Officer,
Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai – 400 051. …Respondent

None for the Appellant.
Ms. Daya Gupta, Advocate with Ms. Harshada Nagare, Advocate for the Respondent.
CORAM : P.K. Malhotra, Member
S.S.N. Moorthy, Member

Per : P.K. Malhotra, Member

Challenge in this appeal is to the order dated November 29, 2010 passed by
the adjudicating officer of th e Securities and Exchange Bo ard of India (the Board)
holding the appellant guilty of violating regulation 54(5) of the Securities and
Exchange Board of India (Depositories and Participants) Regulations, 1996 (for short
‘the regulations’) and imposing a monetary penalty of ` 10 lacs on the appellant.

2. Notice dated September 19, 2011, fixing the appeal for hearing on October 12,
   2011, was sent by speed post at the record ed address of the appellant, which
   according to the postal report, was delivered to the appellant on September 24, 2011.
   However, no one appeared on that day. The case was thereafter adjourned to
   November 21, 2011, December 19, 2011, January 20, 2012 and February 2, 2012. 2
   On all these dates, no one appeared on behalf of the appellant. Therefore, we are
   proceeding to dispose of the appeal on merits on the basis of submissions made in the
   memorandum of appeal, documents annexed thereto and affidavit in reply filed on
   behalf of the respondent.
3. At the outset, learned counsel for the Board stated that the impugned order
   was passed on November 29, 2010 and was se rved on the appellant on December 3,
4. The appellant has, however, contended receipt of the said order on May 1, 2011
   which is incorrect. She has placed on reco rd movement of the speed post showing
   that the impugned order was dispatched on November 29, 2010 and was delivered to
   the appellant on December 3, 2010. Therefore, there is inordinate delay on the part of
   the appellant in filing the appeal and it has not cared to explain or give reasons for the
   delay or even file an application for condonati on of delay. She, therefore, prays that
   the appeal deserves to be dismissed on th is ground alone. Without prejudice, she has
   further submitted that there is delay on the pa rt of the appellant in dematerializing of
   the securities on the National Securitie s Depository Ltd. (NSDL) and Central
   Depository Services (India) Ltd. (CDSL) wh ich is against investor’s interest and
   hence the adjudicating officer ha s rightly imposed a penalty of ` 10 lacs on the
   appellant.
5. We could have rejected the appeal on the ground of inordinate delay itself, but
   we thought it fit to dispose it of on merits of the case as well. We have heard learned
   counsel for the respondent and also peruse d the material available on record. The
   report received from the two depositories show that as many as 394 requests for
   dematerialization in case of NSDL and 54 requests from CDSL have been unduly
   delayed which was in violation of the re gulations. Accordingly, a show cause notice
   dated March 26, 2008 was issued to the appe llant to show cause why enquiry should
   not be held against it and monetary penalty imposed under section 19D of the
   Depositories Act, 1996. The appellant filed its reply by its letters, both dated June 11,
   2010, the relevant portions of which are extracted below for ease of reference: 3
   “This has reference to your s ubjected notice appeared in
   The Hindustan Times dated 11.06.2010 wherein you sought
   the personal appearance of noticees. In this connection, you
   may please note that our Company is not doing any
   business for the last 6-7 years and shares of the Company
   are not traded in any stock exchange of India, the same has
   also been intimated to the Bambay Stock Exchange.
   Further the non activity of the Company has also been
   published in the newspaper, a copy of the newspaper
   cutting is enclosed for your kind reference and records.
   However, we are trying our best to revive the Company for
   the best interest of the Shareholders.”
   “Further we have gone thr ough with the letter and its
   contents and regret to inform you that we have not received
   any share for dematerialization. Apart from above we
   would like to further to inform you that in the previous
   years M/s Information Technologies (India) Limited-Share
   Transfer Agent was the Share Transfer Agent for the
   Company. However, the said STA has closed down its
   operations way back in 2003 and whereabouts of the
   records of the Company is not known to us. Hence in the
   absence of the records we are not in a position to comply
   with your above said notice.”
   In para 5.6 and 5.7 of the appeal, the above submissions have been reiterated by the
   appellant.
6. There has been inordinate delay in dematerializing a large number of shares as
   referred to in the impugned order and the a ppellant has expressed its helplessness on
   account of the reasons given above. The Bo ard is not concerned with the personal
   difficulties of the appellant in not dealing with the request of the shareholders. The
   fact of the matter is that it was the res ponsibility of the appe llant as the issuer
   company to dematerialize the requests within the time prescribed in regulation 54(5)
   of the regulation which reads as under:

“54(5) Within 15 days of receipt of the certificate of
security from the participant the issuer shall confirm to the
depository that securities comprised in the said certificate
have been listed on the stock exchange or exchanges where
the earlier issued securities ar e listed and shall also after
due verification immediately mutilate and cancel the
certificate of security and substitute in its record the name
of the depository as the registered owner and shall send a
certificate to this effect to the depository and to every stock
exchange where the security is listed:”

4
The appellant did not send the requisite info rmation to the depositories to enable the
latter to dematerialize the shares. It is, thus, clear that the appellant violated the
provisions of regulation 54(5) of the regulations and is liable for penalty. Section 19D
of the Depositories Act, 1996 provides for a penalty of 1 lac for each day during which the failure continues or 1 crore whichever is less. In the circumstances of this
case, the adjudicating officer has imposed a penalty of ` 10 lacs. No fault can be
found with the impugned order.
In the result, the appeal fails and the same stands dismissed with no order as to
costs.
Sd/-
P.K. Malhotra
Member

                 Sd/-  
                         S.S.N. Moorthy  
                        Member 

02.02.2012
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